Today, US markets are rallying strongly (Dow up 400 points or so at the moment) on news of coordinated central bank action that, that .... that what? It looks to me like the US and European banks are merely building up liquidity in preparation for potential bank runs. I would have considered this bad news, kind of like news we just went to DEFCON 2, but for some reason the market is rallying (though there was also an ADP report saying hiring was way up last month, which is certainly good news).

As I wrote yesterday, there only appear to be 3 solutions to the European debt crisis and this is not one of them. If I am right and patterns hold, the markets will wake up in a day or two and say, "wait, there is still trillions of Euros of deteriorating sovereign debt sitting on bank balance sheets with 40:1 leverage ratios" and fall back. I am thrilled that our economy shows signs of life and I know that corporate profits have been good, but I don't see any way a European debt crash won't have substantial negative effects on the US. If I am wrong, the market will continue up, up and away and you should stop ever listening to me because I clearly don't understand squat.

Update: Yesterday I posited that real solutions were going to be a combination of 1) default/haircut 2) Make someone else pay back the debt and 3) print money. I have heard it argued this morning that today's announcement may be evidence of #2 (ie, US taxpayers will bail them out) or more likely #3 (since the ECB can't print money, but the Fed seems to be doing a lot of it, lets get the Fed to print more money for the Europeans .... I don't understand the mechanics well enough to pinpoint who would bear the inflationary consequences of this, but betting on the US to be the world's patsy is never a bad bet).

Under the new law, businesses that hire anyone unemployed for at least 60 days would be exempt from paying the 6.2 percent Social Security payroll tax through December. Employers also would get an additional $1,000 credit if new workers remain on the job a full year.

This is absurdly game-able. How do I know? Because as I read this here (I have not read the legislation) this is a ridiculous windfall for our company. As a seasonal business, my current payroll is about 40 people. Over the next two months, I will hire nearly 400 workers for the summer, most of whom have not been working over the winter as they are retired and just work a few months of the year. Am I really not going to have to pay Social Security taxes on all these people?

And how is anyone going to administer this? Are my payroll company and I going to have to figure out the employment status of all of our hires for the last 60 days to figure out what taxes to collect? Does anyone in Congress even think about this stuff when they pass this garbage?

Update #2: Here is my prediction, if they forgot about seasonal hiring (again, I have not read the letter of the law yet). This will be like the cash for clunkers program - in a month or two they will announce that they have used up the money they had allocated for the whole year.

Under both state and federal law, it is illegal for me to hire anyone without documenting that they are in fact a legal US resident and have the right to work in the US. Those of you who read this blog know that this irritates me, given my support for open immigration, but I do it. It is also illegal for me not to make all the relevant state and federal social security and income tax withholdings for each employee, as well as pay premiums into state and federal unemployment funds, all of which require that I have an accurate social security number from each employee. No valid social security number, no job.

All this mess is hard enough to comply with, and it takes a lot of my managers time, a full-time HR person, and thousands of dollars sent to ADP to stay legal.

A Mississippi Democrat in line to become chairman of the House Homeland
Security Committee has warned the nation's largest uniform supplier it
faces criminal charges if it follows a White House proposal to recheck
workers with mismatched Social Security numbers and fire those who
cannot resolve the discrepancy in 60 days.

Rep. Bennie Thompson said in a letter to Cintas Corp. it could be
charged with "illegal activities in violation of state and federal law"
if any of its 32,000 employees are terminated because they gave
incorrect Social Security numbers to be hired.

Great. Now I can go to jail both for employing folks without a valid social security number and for not employing folks without a valid social security number.